Investing for Universal Human Dignity

Our Global Investment Standards emphasize the need for corporations to respect human rights wherever they operate, including freedom of speech, labor rights and the rights of minority groups. We seek companies for our mutual fund portfolios that acknowledge the complexity of these situations and make meaningful efforts to confront them in their operations.

Our research process focuses on the key sustainability challenges faced by each company, within the context of its industry and business model. We recognize that each business model presents its own set of risks and opportunities, across the wide range of human rights and environmental issues. The failure to respect human rights can have a negative impact on the reputation or value of a company. In addition, efforts to help stakeholders fulfill their fundamental rights can provide positive financial benefits to companies, and to the communities they touch. But respect for human rights requires more than a cost-benefit analysis.

Respect for human rights is a fundamental consideration for us. We take a pragmatic approach, recognizing that corporations often operate in difficult environments, including countries where the state is either hostile to human rights protections or cannot fulfill its duties. Systemic issues such as child labor and forced labor still persist, often without the corporation’s knowledge or consent.

Global companies face numerous controversies in their day-to-day operations, including many that indicate a company is failing to live up to its responsibilities. Domini seeks to avoid investment in such companies for our mutual funds, including those with significant connections to the governments of Sudan and Burma. We seek to invest in companies that demonstrate leadership by responsibly addressing the human rights challenges they face. We monitor developments on an ongoing basis, and review our decisions regularly. Our approach recognizes that beyond “avoiding harm,” corporations can provide people with greater access to social goods, enabling them to find happiness and live with self-respect.

We do not expect perfection, and cannot claim to produce a portfolio that is free of corporations with challenges or abuses. However, we do expect companies to have appropriate policies and procedures in place to avoid rights violations and to remedy those that do occur. Credible information on corporate human rights performance can be difficult to obtain. We therefore expect companies to provide the public with meaningful reports to help us all understand their behavior, as well as the real challenges that exist, and we believe governments should require standardized corporate human rights reporting.

Ensuring Fair Access to Social Goods

One key aspect of a life with dignity is access to basic goods and services relating to healthcare and technology. In our research we attempt to identify companies that stress access to medicines and innovative technologies for low-income people and customers in developing countries. For example, the Swiss drug company Novartis has played a leading role in developing anti-malarial drugs, including some for drug-resistant strains of malaria, and provides them at cost for use in Africa, Asia, and Latin America. The South African insurance firm Sanlam provides affordable financial services to entry-level customers in South Africa and affordable insurance for people with HIV/AIDS who agree to adhere to recognized treatment guidelines. Mobile phones provide an affordable option for low-cost wireless communications in developing countries, and the telecommunications company Vivo is reportedly the largest mobile phone provider in Brazil, with 54 million customers.

Direct Engagement

Our standard-setting and research processes determine the questions we ask of the companies we seek to hold, and establish our expectations of these firms. Our research on Toyota Motor, for example, uncovered connections between a key trading partner and the Burmese military regime. Although we have consistently excluded the company from our funds, we helped to lead a three-year engagement by responsible investors with the company. In August 2010, Toyota announced that its trading partner had divested itself from the joint venture.

Domini’s human rights work spans a broad spectrum of activities, beginning with our standard-setting and evaluation of companies for our funds, followed by direct engagement with companies — through proxy voting, letter writing, dialogue and the filing of shareholder resolutions — and finally public policy work by engaging with Congress and organizations such as the United Nations and the Securities and Exchange Commission. We have even helped to build institutions to address human rights issues.

Perhaps the most high-profile human rights controversies that companies face arise within their global supply chains. Over the years, we have worked with a range of companies to encourage them to establish strong codes of conduct and meaningful monitoring programs that address the full range of labor rights that arise on the factory floor and in the production of the raw materials for their products. As a result, Gap has produced a series of groundbreaking public reports and a variety of other companies have adopted codes of conduct and improved practices and public reporting. In 2010, we convinced Nucor, the largest steel producer in the U.S., to adopt an important set of policies to address the presence of slavery in the supply of Brazilian pig iron.

Around the world, most recently in Egypt, we have seen how Internet and telecommunication technologies can be used to organize political movements, as well as suppress them. Corporations are at the center of these controversies, facing frequent demands from governments that may violate fundamental human rights and undermine the benefits these technologies provide.

In 2005, Domini was a primary author of a joint investor statement calling on Internet businesses and their shareholders to support freedom of expression worldwide, gaining supporters representing more than $20 billion in assets. We are also a founding member of the Global Network Initiative, a human rights organization that includes a range of prominent human rights organizations, press freedom groups, academics, investors, and corporations, including Google, Microsoft and Yahoo. The GNI has developed a set of principles and implementation guidelines to help companies navigate these difficult issues consistent with international human rights law.

Consumer products companies have important opportunities to help advance human rights through their product offerings. In 2003, after years of overproduction and falling prices left millions of farmers unable to feed, clothe, and educate their families, Domini helped convince Procter & Gamble to offer its first line of Fair Trade Certified® coffee.In 2007, Domini participated in a successful effort to convince Starbucks to recognize Ethiopia’s ownership of the names of its traditional coffees, an agreement Oxfam said would help poor farmers capture a higher price for their crops.

The most serious rights abuses generally occur in countries ruled by repressive regimes, or in “weak governance zones,” including areas of conflict. Domini is a founding member of the Conflict Risk Network, a network of investors that seeks to leverage more than $500 billion in combined assets to address atrocities and avoid genocide in conflict zones around the world. We also helped bring attention to the annual forced mobilization of children in Uzbekistan to harvest cotton, and briefed two congressional committees on what investors can do to address genocide.

The Domini Funds are not insured and are subject to market risks, such as sector concentration and style risk. Investing internationally involves special risks, such as currency fluctuations, social and economic instability, differing securities regulations and accounting standards, limited public information, possible changes in taxation, and periods of illiquidity. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. You may lose money.

The Domini Social Bond Fund is not insured and is subject to market risks, including interest rate and credit risks. During periods of rising interest rates, bond funds can lose value. The Domini Social Bond Fund currently holds a large percentage of its portfolio in mortgage-backed securities. During periods of falling interest rates, mortgage-backed securities may prepay the principal due, which may lower the Fund’s return by causing it to reinvest at lower interest rates. Some of the Domini Social Bond Fund's community development investments may be unrated and carry greater credit risks than its other investments.